RSM Australia

Where to with the Wine Tax?

Anyone working with the wine tax on a day-to-day basis would agree it is not a simple tax. The basics are straightforward, it is around the edges where it gets difficult. 

I’ve found most small wine businesses wish to sell their product at a reasonable price without too much complication brought on by the taxation system. It seems crazy that a large number of small businesses are working out the wine tax they owe each quarter simply to then claim it back on the same Business Activity form they lodge. The net gain to the government and small business is zero but the angst, paperwork and compliance cost to the small business has sometimes been relatively large.

As the transactions get more complicated the paperwork gets more complicated. What rate to apply and what paperwork is the small business required to hold? 

The government has said its objective is to achieve a better tax system that delivers taxes that are lower, simpler and fairer.

The Assistant Treasurer announced on 5th May 2015 that the Treasury had been asked to prepare a discussion paper examining the Wine Equalisation Tax Rebate (WET rebate). This paper forms part of the Tax White Paper process and will help inform the conversation on taxation reform.

The Treasury of The Australian Government then released its discussion paper in August 2015. This is a very informative paper as it points out some of the challenges faced with the current system.  It also put forward some alternatives to the current rebate system.

The WET rebate provides wine producers with a rebate of up to $500,000 per year. This rebate is very valuable to many producers as it effectively sees them pay no wine tax on their wine sales. Some actually benefit from getting a refund on wine sales their Distributor achieves for them. Any change to this rebate needs to be very carefully thought through.

The Government has also established the WET Rebate Consultative Group, which will consider submissions and provide advice to the Government on options for reform. The Consultative Group includes two members from Western Australia.
Hopefully any policy changes to the wine tax system do consider what the net benefit is to both government and small business. They need to consider how this tax can be made ‘lower, simpler and fairer’.